With 25 or more years ahead of you before retirement, your goal is to get started! Although retirement is seemingly a long way off, the earlier you start preparing and saving for your retirement, the easier it will be to maintain your lifestyle after your working days are over. Compound interest – the interest earned on principal and past interest payments – allows young investors to save smaller amounts of money to reach the same goals as someone who starts much later.
Consider the following example: Assume two investors both earn an 8% annual rate of return on their investments and are reinvesting their gains. The early investor begins saving at age 25, and the late investor does not begin until age 45. The chart below shows the total amount of savings each will need in order to reach $1,000,000 at retirement, assuming a constant 8% annual return.
As the graphic dramatically illustrates, it clearly pays to start planning for your retirement as early as you can.
With many years until retirement, you can afford to be more aggressive in your allocation while still investing in an overall asset mix that is appropriate for your risk tolerance. Although there is time to make up for investment losses, care should always be taken to prevent large draw-downs in your retirement portfolio. 401K GPS’s Protactical™ process should assist you in preventing large losses during market corrections.
Stay on Course
With retirement seemingly so far into the future, it can be difficult to maintain an investment discipline. Inaction and complacency can result in arriving short of your retirement goals, forcing you to be more aggressive than you would like or than is appropriate in later years.
401K GPS will provide a disciplined framework for you to stay on track until retirement. Along with helping you select the actual investments for your 401K based on your risk profile, we will provide quarterly and emergency intra-quarter recommendations to help you achieve your retirement objectives.
Of course there is no guarantee that our signals will be correct every time; however, we will make every effort to protect you in down market cycles. We recommend consulting with a tax or financial advisor to obtain appropriate advice regarding your comprehensive retirement, investment, and tax planning.